A method of deferring compensation for executives is the use of a rabbi trust. The instrument was named - rabbit trust - because it was first used to provide deferred compensation for a rabbi. Generally, the Internal Revenue Service (IRS) requires that the funds in a rabbi trust must be subject to the claims of the employer's creditors.
This information is current as of December, 2007, but is subject to change if tax laws or IRS regulations change. Current tax laws should be consulted at the time of the preparation of such a trust.
A Houston Texas Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — a Rabbi Trust is a specific type of trust established in Houston, Texas for the sole purpose of providing deferred compensation benefits to executive employees. This trust is commonly known as a "Rabbi Trust" and is designed to ensure the funded assets remain separate from the employer's general assets, reducing the risk of loss in the event of corporate bankruptcy or financial instability. The Houston Texas Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — a Rabbi Trust is created by an employer to provide additional compensation benefits to key executives or highly compensated employees who meet certain criteria. These trusts are governed by Internal Revenue Service regulations outlined in Section 402(b)(5) of the Internal Revenue Code. These trusts offer various advantages for both the participating employees and the employer. From an employee's perspective, it allows them to defer a portion of their salary or bonus to a future date, typically upon retirement or termination of employment. This provides them with the opportunity to accumulate additional wealth for their post-employment years. Regarding employers, the establishment of a Houston Texas Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — a Rabbi Trust offers considerable flexibility in compensation packages. It allows employers to attract and retain top talent by providing lucrative deferred compensation benefits tailored to individual executive needs. Additionally, the employer can deduct the contributions made to the trust as a business expense, thus potentially reducing their tax liability. It's worth noting that there are several variations or subtypes of the Houston Texas Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — a Rabbi Trust, which may include: 1. Salary Deferral Trust: This type of trust allows employees to defer a portion of their salary to be paid out at a later date, typically retirement. It provides executives with consistent income during their retirement years and allows for better retirement planning while potentially reducing their current taxable income. 2. Bonus Deferral Trust: Similar to the salary deferral trust, the bonus deferral trust allows executives to defer their annual bonuses to a future date, often upon retirement or separation from the company. This trust provides an additional tool for executives to manage their taxable income and plan for their financial future. 3. Supplemental Executive Retirement Plan (SERP): A SERP is a specific type of deferred compensation plan that uses a trust to provide supplemental retirement benefits for highly compensated executives. The SERP can be designed to provide a predetermined retirement income to executives, allowing for more flexibility and potentially higher retirement benefits than those provided by traditional retirement plans such as 401(k)s or pensions. In conclusion, the Houston Texas Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — a Rabbi Trust is a specialized trust used by employers to provide additional compensation benefits to their key executives. It offers advantages for both employers and employees by enabling flexible compensation packages and allowing executives to defer income to secure their financial future.
